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Morning Commentary

Outrunning the Four Horsemen

By Charles Payne, CEO & Principal Analyst
9/22/2020 9:34 AM

Albrecht Dürer, The Four Horsemen of the Apocalypse - Smarthistory

‘The Four Horsemen of the Apocalypse’ Albert Durer  

It was an intriguing session yesterday for many reasons.  Weakness and downside pressure finally broke the dam at the opening bell, and while selling begets more selling, there was never a sense of panic and buyers materialized.  The problem is there was a sense of frustration with a dollop of uncertainty.

Frustration over the hijinks in Washington, D.C. and the uncertainty over how much the U.S. will overreact once a fall wave of coronavirus cases occurs.

Since March 2009, the ultimate moneymaking approach to trading and investing has been to buy the dip.  The reason this strategy has worked is because the stock market has been able to dig deep and remain resolved to moving higher, even when doomsday felt imminent. 

Face it, back in March and April that was doomsday.  It was the manifestation of fire and brimstone written by Dante and immortalized in paintings from all the old masters, including Albert Durer.       

Wall Street wrote off the stock market and economists saw an economy that would be mired in misery not unlike the Great Depression.  Instead of being a wreck for a generation, the melt down was a generational opportunity.  And while there is a long way to go before the entire nation is healed, this is not the Great Depression.

Americans are a resolute people. Even when they allow doubt of troublemakers and would-be king or queen makers to cast doubt in order for them to gain even more power, we remain resolute.  Even when we say we aren’t sure; we are thinking of ways to bounce back.  And we do.

Yesterday was a microcosm of that resolve.  It’s remarkable, and it’s difficult to quantify, or even model as a guide for your portfolio, other than you should not panic.   Taking periodic losses is a part of trading, but that’s different than throwing in the towel.  Be on the lookout for ways to make money while others stampede for the exits.

There are lots of things to be worried about, and more to simply be angry about, but those emotions should not dictate how you tackle the stock market.  The biggest foes of the stock market are not the overhyped ebullience of Robinhood traders blamed for every pullback, but the folks blaming them. 

Market Breadth

For the first time in months, we are seeing more 52-week lows than highs, which underscores the fact the short term bias has turned negative.  Interestingly, the New York Stock Exchanges endured more damage than the NASDAQ Composite, which was supposed to be more vulnerable, as investors were rotating into low beta value names.   Turns out, investors have decided they want safety and upside potential in the same package. 

Market Breadth

NYSE

NASDAQ

Advancing

443

668

Declining

2,623

2,824

Unchanged

45

51

Total

3,111

3,543

Milestones

52 Week High

19

36

52 Week Low

42

60

Volume

Advancing

573.82M

1.55B

Declining

4.27B

2.35B

Unchanged

14.70M

10.63M

Total

4.86B

3.91B

 

Safety and Upside

Monday’s session was ugly, but it was also a session that revealed so much about the psyche of the market.  Broadly, investors need exogenous events to happen.  But once the primary mover of the major indices becomes organic, the action will be in sectors and industries that are growing and capable of carrying the board market.

This is why Technology was the only sector to finish the session higher.  Investors want safety, but they also a chance to make big money when the dust settles.

S&P 500 Index

 

-1.16%

Communication Services XLC

 

-1.17%

Consumer Discretionary XLY

 

-1.44%

Consumer Staples XLP

 

-0.76%

Energy XLE

 

-3.32%

Financials XLF

 

-2.50%

Health Care XLV

 

-1.85%

Industrials XLI

 

-3.32%

Materials XLB

 

-3.37%

Real Estate XLRE

 

-2.68%

Technology XLK

+0.83%

 

Utilities XLU

 

-0.62%

Fintech over Financials

Almost every single day someone comes on my show and points to the opportunities to make money by buying Financials on weakness.  These are very accomplished folks, but the Financials continue to be disappointing.

I think its time investors consider financial tech or fintech over Financials.  Yesterday, big bank stocks were dragging the S&P, and American Express was anchoring the Dow Jones Industrial Average, on reports of an 18-year scam that allowed the world’s bad guys to laundry money in the biggest banks in the world.

The two trillion dollars that flowed along side your mortgage payments provide big money and big bonuses for big banks.  Sadly, it’s the kind of news we have come to expect from big banks.  Meanwhile, a new world is emerging where technology meets banking and its setting the world on fire.  This fintech world is gobbling up billions in the private sector and public names are sizzling.

It’s time to consider these names in your portfolio.  There are a few indices that attempt to cover this niche, but the one I think comes closest is Tortoise Digital Payments Infrastructure which holds:  DocuSign (DOCU), Square (SQ), PayPal (PYPL), Jack Henry (JKHY), Visa (V) and Mastercard (MC).   

NASDAQ Composite

Watch the NASDAQ Composite today.  The index made a strong rebound and closed fractionally lower.  The problem is the index is now in a downtrend, making lower lows and lower highs.  It will need to get above 11,200 before turning the tide enough to trigger more buying than selling.

NASDAQ

Portfolio Approach

We are adding a new idea in Technology to our Hotline Model Portfolio.

Today’s Session

All the major indices are green as we wait to hear from Mnuchin and Powell attempt to get Congress to move on more stimulus before it’s too late. 


Comments








new election, new voting schemes
Whatever happened to the Dems plan for voting on your phone and computer?

Keith M Kundahl on 9/22/2020 10:20:20 AM
 

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